Vertical Financials
Profitability

Fixed Costs

Definition

Costs that stay roughly the same no matter how much you sell in a month, like rent, salaries, software and insurance.

Fixed costs set the hurdle your contribution margin must clear before you make a profit. They are why growth feels so good once you pass break-even: each extra sale drops more to the bottom line.

They also make slow months painful, because they do not shrink. Watch for: fixed costs creeping up through small subscriptions and hires, raising your break-even point without anyone noticing.

Example

Rent of $6,000, salaries of $32,000 and software of $3,500 add up to $41,500 of fixed costs whether you sell $100,000 or $200,000 that month.

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